Saturday, 2 October 2010

Skills, equity hurdles to investment

Malaysia doesn't need Nobel laureates or a man who can go to the moon but qualified, hands-on people to raise their level of competence, says German Ambassador to Malaysia

Several factors are deterrents to a larger number of German investors putting their money into Malaysia, and top of the list is the lack of a qualified workforce.

"Malaysia doesn't need Nobel laureates or a man who can go to the moon but qualified, hands-on people to raise their level of competence," said German Ambassador to Malaysia, Dr Guenter Georg Gruber.

He said Malaysians appear to have the notion that an engineer's work is to get suited up and sit in the office all day.

"Nobody in Germany does that. A qualified engineer goes down to the pits and repair the machines himself, if need be, and he is respected for the willingness to get his hands dirty. Here, the engineers are ... different."

He said this boils down to the lack of emphasis and importance placed in vocational training.

Possibly, it stems from the lack of social acceptance of a person who works with his hands here, Gruber told Business Times in an interview in conjunction with the 20th anniversary of the reunification of East and West Germany tomorrow.

Social acceptance is equally high in Germany whether you are a painter, an electrician or an engineer - as long as you are a master of your craft. "In fact, if you are a good electrician, you will be highly respected and earn good money."

This appreciation of applied knowledge is probably what propelled Germany to become a world leader in innovation, science and technology today.

As a case in point, he cited his two brothers: one who is a painter and the other, an electrician. Both earn more than he does.

Malaysians are too engrossed in the paper chase that they forget about skill acquisition. Parents' role in this obsession cannot be downplayed, Gruber said.

"You should always ask what the industry needs. But here, parents only want to send their children abroad, (probably) to some third-class university to get a foreign degree."

Another factor which he feels is holding back German investors is the Bumiputera equity policy.

Germany's "hidden champions" - the powerful, often family-owned small- and medium-scale enterprises (SMEs) - are keen to invest here, but are wary of having to give up a substantial share of their business to a "complete foreigner".

"These are often businesses which have been kept in the family for possibly hundreds of years. They would not want to share their company with someone they don't know."

Although they have heard of many positive news from the government on reducing the equity quota, Gruber said that many were still hesitant and adopting a "wait and see" attitude to assess how the new policies would be implemented.

One major German SME which is already here, B-Braun Medical Supplies Sdn Bhd, is currently suffering from market access problems due to the Bumiputera issue, he disclosed.

B-Braun is a company with worldwide presence and an established history of supplying medical solutions in the surgical, pharmaceutical and healthcare management fields.

It does not have a Bumiputera partner, which prevents the company from bidding for government contracts.

"B-Braun has been investing since 1972 because they have had good experience here and want to continue. But they are being excluded in public tendering because of the Bumiputera issue," said Gruber.

Although this was initially regarded as a "small issue", it is now becoming a sore point for the company as a new Asean rule states that any company excluded from public tender in an Asean member's market "would be excluded from all Asean markets".

"This is not a very positive image for Malaysia if you want to attract more foreign investments," Gruber said.

Germany has long been recognised for its "highly specialised small and medium enterprises" segment. They are often called "hidden champions" because most produce inconspicuous products but are global market leaders in their own segments.

"We don't want to impose any ideas on the Malaysian government. They have to choose for themselves whether they want to evolve to remain competitive. Malaysia is doing a lot of reforms as we speak and many initiatives are laudable and fantastic. But implementation, as always, has been a bit of an issue here."

Germany is one of the top four investors in Malaysia in terms of cumulative investment value, currently at more than RM16 billion.

Even during times ofeconomic crisis, such as last year, when overall foreign direct investments into Malaysia dwindled considerably, fresh money was still coming in from Germany of about RM200 million.

Gruber said that although German investments have remained quite constant, Malaysia has to work harder to stay competitive.

"We have to be frank. A lot of investment goes to China now and to be and remain a world-class leader, Malaysia has to find its niche."

He suggested that the country look at expending its efforts in developing the renewable energy and pharmaceutical sectors.

"Malaysia is uniquely blessed with many renewable energy sources - palm oil, biomass, sun, water - but it has not fully capitalised on them," Gruber said.